Electricity Price Review

The EPR dashboard

The dashboard below outlines progress towards key work streams led by the Ministry of Business, Innovation and Employment. The Electricity Authority is leading a number of other work streams.

MBIE work streams

Strengthening the consumer voice

Establish the consumer advocacy council

EPR found that smaller consumers struggle to make their voice heard and influence the electricity sector. The obstacles include the sector’s complexity, consumers’ lack of resources, and cultural differences and language barriers.

Government has agreed to establish the Consumer Advocacy Council to be the trusted, credible, authoritative and independent advocate for residential and small business electricity consumers. Its role will be to advocate on behalf of these consumers by providing evidenced-based advocacy on policy and regulatory consultations, and in decision-making processes. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

The Council Chair was announced in July 2021 and the recruitment of the other Council members are expected to be announced in mid 2022.

Chair of Consumer Advocacy Council announced(external link) – Beehive.govt.nz media release

All appointments are subject to approval of the relevant Ministers and the usual appointments process. The Council’s Terms of Reference is also subject to government approval. A Secretariat to support the Council was established in September 2021.

Key achievements to date include:

• undertaking stakeholder engagement, including with community and small business representatives, industry, regulators and Energy Consumers Australia, the Council’s Australian equivalent
• finalising the Council’s strategy to inform key priorities
• undertaking a literature review and gap analysis to develop the Council’s research priorities
• submitting on the Electricity Industry Amendment Bill to the Economic, Development and Science and Innovation Select Committee and appearing at the hearing in support of the submission in November 2021.

Electricity Price Review – recommendation A1 [PDF, 854KB](external link)

Reducing energy hardship

Establish a cross-sector energy hardship group

The causes of energy hardship extend beyond the electricity sector, and the solutions require joint action. Government has established an Energy Hardship Expert Panel to recommend policy priorities and actions to alleviate energy hardship in New Zealand, and the Energy Hardship Reference Group to provide a forum to share information and encourage coordination across industry, NGOs and government agencies. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

Members of the Energy Hardship Expert Panel were announced in September 2021 and have been appointed until 30 June 2023, unless their work is completed sooner.

Members of the Energy Hardship Reference Group were announced in December 2021 and have been appointed for a 12-month term.

Energy hardship expert panel and reference group

Electricity Price Review – recommendation B1 [PDF, 854KB](external link)

Define energy hardship

MBIE is working to develop an agreed definition of energy hardship, and associated indicators, to measure energy hardship over time. This will also assist with identifying those in energy hardship and assessing the effectiveness of initiatives to address energy hardship. MBIE sought feedback on the proposed definition and measures throughout November and December, 2021. Submissions are currently being processed, and a Summary of Submissions report is being prepared for publication. Submission feedback, along with MBIE’s planned further research and analysis, will contribute to the development of MBIE’s recommendations on defining and measuring energy wellbeing and hardship in Aotearoa.

Have your say: Defining Energy Hardship Consultation

To support future analysis, MBIE is working with the Electricity Authority, the Electricity Retailers’ Association of New Zealand, electricity retailers and Stats NZ to make arrangements for key electricity usage data to be included in the Integrated Data Infrastructure (IDI). The IDI is a large research database holding anonymised microdata about people and households in New Zealand.

Electricity Price Review – recommendation B2 [PDF, 854KB](external link)

Build a network of community-level support services

This initiative aims to progressively link and expand existing support services to establish a nationwide network of organisations offering credible, independent, electricity-specific advice and support services to those in energy hardship. A separate fund, sitting alongside this network, will assist households in energy hardship become more energy efficient.

The $17 million consumer advocacy and energy hardship budget package announced in August 2020 includes funding for the Support for Energy Education in Communities (SEEC) Programme that has been established to deliver community-level energy education to help households in need. Projects are selected through open funding rounds, which are being held regularly.

See more information about the SEEC Programme, upcoming funding rounds and funded projects to date:

Support for Energy Education in Communities Programme

Another relevant 2020 budget announcement is a $28 million fund to trial renewable energy technology for public and Māori housing to test new and innovative ways to make energy affordable for people.

More information about renewable energy funding for Māori and public housing

Electricity Price Review – recommendation B3 and B4 [PDF, 854 KB]

Prohibit prompt payment discounts

The EPR found that prompt payment discounts (PPDs) are excessively high and not cost reflective. They cause additional hardship for those that can least afford it, and they contribute to customer confusion when comparing prices.

The Minister of Energy and Resources wrote an open letter in November 2019 to retailers setting out concerns with PPDs and the intention to revisit the EPR recommendation to prohibit them in six months. A follow up letter was sent to retailers in July 2020 asking for information as input to revisiting this. The Electricity Authority has initiated monitoring to collect and analyse data from retailers on early payment discounts and late payment penalties. This analysis will inform the Ministry’s consideration of appropriate next steps to address the EPR findings and recommendations. The Minister has previously made it clear that regulation to address the EPR’s findings on PPDs remains an option.

Electricity Price Review – recommendation B7 [PDF, 854KB](external link)

Arrangements for vulnerable and medically dependent consumers

EPR recommended that the government establish mandatory minimum standards that distributors, retailers and others must meet when providing electricity or related services to vulnerable and medically dependent consumers. The Electricity Authority should monitor and enforce the standards.

The Electricity Authority has developed new Consumer Care Guidelines, which took effect from 1 July 2021, that replace the existing arrangements for vulnerable and medically dependent consumers. This work forms the first phase of progressing this EPR recommendation, and MBIE officials are liaising with the Electricity Authority. More information can be found on the Electricity Authority’s website.

Consumer care guidelines(external link) — Electricity Authority

Subsequent phases will depend on the outcome of the first phase, and on progress with related EPR activities, particularly the passage of the Electricity Industry Amendment Bill which would clarify the Electricity Authority’s ability to enforce consumer protection measures such as mandatory minimum standards.

The Authority published the ‘Consumer Care Guidelines – Overview for domestic consumers’ in September 2021. This overview provides information to consumers on the type of experience they can expect from electricity retailers following the guidelines.

Electricity Consumer Care Guidelines – Overview for domestic consumers [PDF, 335KB](external link)

Electricity Price Review – recommendation B6 [PDF, 854KB](external link)

Improving transmission and distribution

Issue a GPS for transmission and distribution pricing

EPR recommended government should issue a government policy statement (GPS) to the Electricity Authority that should shape its preparation of new guidelines for setting transmission prices. Consideration of a possible GPS is paused while the Electricity Authority progresses its Transmission Pricing Methodology (TPM) work programme. MBIE is monitoring TPM progress and evaluating whether there is need to issue a GPS.

EPR also recommended government should issue a GPS to the Electricity Authority to guide it through its reforms to distribution pricing. MBIE is monitoring progress with distribution pricing reform and evaluating whether there is a need to issue a GPS.

Electricity Price Review – recommendation E1 and E2 [PDF, 854KB](external link)

New powers for the Commerce Commission to regulate distributors

The EPR considered that the Commerce Commission lacks sufficient powers to address certain future issues identified in the regulation of distributors. The EPR’s recommendation does not address any significant or pressing problems but is aimed at making the regime more flexible for the future. Providing such flexibility needs to be balanced against the certainty that the current economic regulation regime provides.

Before progressing changes, further policy work is required, including the development of clear policy rationales and an assessment of alternatives to the EPR’s recommendation. The policy work also needs to be balanced against other priorities in the economic regulation policy area. MBIE will report back to Ministers once the background policy work has been undertaken.

Electricity Price Review – recommendation E4 [PDF, 854KB](external link)

Improving the regulatory system

Amend the Electricity Industry Act

Government has agreed to progress amendments to the Electricity Industry Amendment Act 2010 to address areas identified for improvement in response to EPR findings and recommendations.

These include:

• provisions relating to Consumer Advocacy Council (power to appoint and recover costs from industry participants)
• giving the Electricity Authority a specific consumer protection function
• giving the Electricity Authority clearer powers to regulate network access agreements
• giving the Electricity Authority more flexible powers to regulate distributors’ involvement in contestable electricity markets
• clarifying the Electricity Authority’s information gathering powers.

The Government also proposes to provide a regulatory backstop to ensure timely action by industry and the Electricity Authority on matters relating to specific EPR recommendations improving the wholesale and retail markets.

The full details are set out in the following documents:

The Electricity Industry Amendment Bill was introduced to the House in September 2021 and was referred to the Economic Development, Science and Innovation Committee. Cabinet agreed further amendments to the Bill in February 2022, including changes resulting from MBIE’s review of the Electricity Authority’s compliance framework. Further details are set out in the following documents:

The Select Committee considered submissions on the Bill and reported back to the House on 22 March, 2022 recommending that the Bill be passed. The Bill passed its second reading in the House on 17 May 2022 and will now proceed through the next steps of the legislative process, expected to be completed by late 2022. Visit the Parliament website for more information on the Bill, including the links to submissions and Select Committee’s report.

Electricity Industry Amendment Bill(external link) — New Zealand Parliament

Phase out low fixed charge tariff regulations

The EPR found that the low fixed charge tariff regulations are poorly targeted and result in a number of unintended consequences. The EPR recommended that the regulations should be phased out because they worsen energy hardship for some households and promote inefficient choices for new technologies, such as rooftop solar and electric vehicles. They also increase pricing complexity and confusion, making it harder for consumers to shop around for the right electricity plan.

Government acknowledged the EPR’s findings on the regulations, but was mindful of the potential impacts of a phase-out. MBIE engaged with industry and consumer groups to better understand the likely impacts, and designed a phase-out mechanism that balances ensuring a just transition with taking meaningful steps to reduce the harm the regulations create.

In September 2021, Government agreed to phase-out the regulations and announced it had secured industry commitment to develop and fund a power credits scheme to support low-income households struggling with higher power bills while the regulations are being phased-out. 

In December 2021, amendments were made to the regulations to allow for the phase-out of the low fixed charge regulations. The phase-out commenced 1 April 2022 and will continue over 5 years to April 2027, at which point the regulations will be repealed.

Phasing-out low fixed charges tariff regulations

Electricity Price Review – recommendation F4 [PDF, 854KB](external link)

Update the Electricity Authority’s compliance framework

The EPR recommended that government should review the compliance framework in the Electricity Industry Act 2010 and related enforcement regulations to bring them up to date with best practice. The existing framework dates back more than 20 years and is based on contracts between industry participants that were incorporated into the regulatory framework when self-regulation ended in 2003. It has undergone only relatively minor changes since then. The EPR proposed MBIE complete a review and recommend any changes needed to make the compliance regime consistent with best regulatory practice, to ensure it continues to serve consumers well into the future.

MBIE consulted with affected parties regarding the identified issues and possible options to address them.

Following Cabinet agreement in February 2022, changes to primary legislation relating to the compliance framework were incorporated into the Electricity Industry Amendment Bill. Updating the Electricity Authority’s compliance framework also requires amendments to the Electricity Industry (Enforcement) Regulations 2010. Cabinet agreed to updating the regulations, which will be progressed after the Bill completes the legislative process.

Electricity Industry Amendment Bill(external link)

Further details can be found in the following documents:

On 22 March, the Economic Development, Science and Innovation Committee reported back to the House on the Bill and recommended that it be passed. The Bill will now proceed through the next steps of the legislative process, expected to be completed by late 2022.

Submissions received

Electricity Price Review recommendation F3 [PDF, 854 KB]

Preparing for a low-carbon future

Explore new institutional arrangements for energy policy and regulation

EPR recommended government explore new institutional arrangements in the energy sector. This reflects the importance of fit for purpose energy institutions in facilitating the transition to a low-carbon economy. EPR did not identify any major concerns with the existing arrangements.

In response to this recommendation, changes have been made in the approach and focus of the Council of Energy Regulators to improve co-ordination and engagement amongst its five member agencies: the Commerce Commission, the Energy Efficiency and Conservation Authority, the Electricity Authority, the Gas Industry Company and MBIE. The Ministry will continue to explore further opportunities to strengthen co-ordination amongst the Council’s member agencies as part of its on-going work and engagement.

Preparation of the government’s Emissions Reduction Plan under the Climate Change Response Act and the development of an Energy Strategy also provide opportunities, and strengthen the need, for greater coordination across government.

Electricity Price Review – recommendation G3 [PDF, 854KB](external link)

Improve building energy efficiency

In May 2021, MBIE publicly consulted on proposed Building Code changes that would make homes and buildings warmer, drier, healthier and more energy efficient. In November 2021, MBIE announced it is proceeding with changes to energy efficiency for housing and small buildings, energy efficiency for large buildings and energy efficiency for heating, ventilation and air conditioning (HVAC) systems in commercial buildings.

2021 Building Code Update(external link) — Building Performance

In addition, the Government has established the Building for Climate Change programme to deliver a step-change in energy efficiency for new and existing buildings. The programme intends to reduce emissions from buildings during their construction and operation, and ensure New Zealand’s buildings are resilient enough to withstand changing climate conditions. The programme will play a key role in the Building and Construction sector’s contribution to the Emissions Reduction Plan.

Building for climate change(external link)

Background: Why the review was conducted

In April 2018, the Minister of Energy and Resources commissioned an independent review into New Zealand’s electricity market. This was because electricity prices, especially for residential consumers, increased faster than inflation for many years, putting pressure on household budgets. In comparison, prices faced by commercial and industrial customers remained relatively flat.

Such reviews are not new. Since the 1970s, New Zealand has reviewed its electricity sector roughly every decade – each time substantial changes have been made to improve or correct the sector’s performance. In the 1980s and 1990s, the sector was privatised to improve commercial performance, and a light-handed regulatory regime was developed. By the 2000s, concerns about industry performance and self-governance arrangements resulted in further improvements being made, including developing new regulations and improving market competition to restrain retail prices to efficient levels.

However, the 2018-19 review was unique as it addressed the need for electricity prices to be fair and affordable, not just efficient or competitive. Another novel element was the review’s focus on the consumers’ point of view and their say in the direction of the sector.

This review also considered how to future-proof the sector and its governance structures to help ensure the electricity sector functions well during New Zealand’s transition away from carbon-based fuels – a consideration that will become increasingly important as electricity meets more of New Zealand’s energy needs, and as new technologies are adopted.

As energy production and consumption is such an integral part to New Zealand’s economy, this review was of great interest to the industry and the public.

Further background

More information on the review process